4000 - Advisory Opinions
Insurance Coverage Afforded Commingled Deposit Account of Chapter 13 Trustee
August 17, 1993
Douglas H. Jones, Deputy General Counsel
Thank you for your August 3 letter regarding insurance coverage of deposits made by Chapter 13 bankruptcy trustees that exceed $100,000 per account and represent the commingled funds of various bankrupt debtors' estates.
Over the years FDIC has consistently taken the position that the commingled deposit account of a Chapter 13 trustee is insured as a statutory trust under the irrevocable trust provision of our insurance coverage regulation (see 12 C.F.R. 330.11). Recent changes to the regulation have not altered the treatment of such accounts, which continue to be separately insured up to $100,000 as to the interest of each debtor's estate and up to an additional $100,000 as to any funds in the account that cannot be allocated to a particular debtor's estate. Thus, such an account would be fully insured so long as the total funds of any one bankrupt debtor's estate at the same insured institution do not exceed $100,000 and the total unallocable funds held at any one insured institution by any one person acting as a Chapter 13 trustee do not exceed $100,000. Any non-bankruptcy funds deposited at the same institution by the trustee or by any bankruptcy debtor, creditor or other person would be separately insured and would not be aggregated with Chapter 13 trust funds in applying these limits.
In order to qualify for this "pass-through" coverage of $100,000 per bankrupt debtor's estate, the deposit account records of the insured depository must expressly and specifically disclose the existence of a fiduciary relationship (such as by using the word "trust" or "trustee"), and records maintained by or on behalf of the Chapter 13 trustee must detail the extent of each debtor estate's interest in the commingled funds on deposit. The account stylings and procedures described in your letter seem to meet these requirements.
Please let us know if any further explanation in this regard is desired.